Edgar Filing: ANIXTER INTERNATIONAL INC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 29, 2006

[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to ___________

COMMISSION FILE NUMBER: 1-5989

ANIXTER INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)

DELAWARE 94-1658138
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

2301 PATRIOT BLVD.
GLENVIEW, ILLINOIS 60026
(224) 521-8000
(Address and telephone number of principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer (as defined in Exchange Act
Rule 12b-2).

Large Accelerated Filer [X] Accelerated Filer [ ] Non-Accelerated Filer [ ]

Indicate by check mark whether the registrant is a shell company (as
defined in Exchange Act Rule 12b-2).

Yes [ ] No [X]

At October 26, 2006, 39,297,025 shares of the registrant's Common Stock,
$1.00 par value, were outstanding.

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ANIXTER INTERNATIONAL INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
PAGE
----

Item 1. Condensed Consolidated Financial Statements................... 1

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 16

Item 3. Quantitative and Qualitative Disclosures about Market Risk.... *

Item 4. Controls and Procedures....................................... 27

PART II. OTHER INFORMATION

Item 1. Legal Proceedings ............................................ *

Item 1A. Risk Factors.................................................. *

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds... *

Item 3. Defaults Upon Senior Securities............................... *

Item 4. Submission of Matters to a Vote of Security Holders........... *

Item 5. Other Information............................................. *

Item 6. Exhibits...................................................... 28

*No reportable information under this item.

This report may contain various "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The statements can be identified by
the use of forward-looking terminology such as "believe," "expects," "intends,"
"anticipates," "completes," "estimates," "plans," "projects," "should," "may" or
the negative thereof or other variations thereon or comparable terminology
indicating the Company's expectations or beliefs concerning future events. The
Company cautions that such statements are qualified by important factors that
could cause actual results to differ materially from those in the
forward-looking statements, a number of which are identified in this report.
Other factors could also cause actual results to differ materially from expected
results included in these statements. These factors include changes in supplier
or customer relationships, technology changes, economic and currency risks, new
or changed competitors, risks associated with inventory, commodity price
fluctuations and risks associated with the integration of recently acquired
companies.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

ANIXTER INTERNATIONAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

13 WEEKS ENDED 39 WEEKS ENDED
-------------------------- --------------------------
(IN MILLIONS, EXCEPT PER SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 30,
SHARE AMOUNTS) 2006 2005 2006 2005
----------- ------------ ------------ ------------

NET SALES .................. $ 1,330.5 $ 1,009.2 $ 3,640.8 $ 2,821.8

Cost of operations:

Cost of goods sold ....... 1,010.0 769.6 2,756.0 2,147.3

Operating expenses ....... 223.2 189.9 634.9 537.5

Amortization of
intangibles ............. 1.2 0.8 3.2 2.3
----------- ----------- ----------- -----------

Total costs and
expenses ............ 1,234.4 960.3 3,394.1 2,687.1
----------- ----------- ----------- -----------

OPERATING INCOME ........... 96.1 48.9 246.7 134.7

Other (expense) income:

Interest expense ......... (10.0) (6.9) (27.5) (18.9)

Extinguishment of debt ... -- -- -- (1.2)

Other, net ............... 8.2 (0.3) 6.6 (2.3)
----------- ----------- ----------- -----------

Income before income
taxes .................... 94.3 41.7 225.8 112.3

Income tax expense ......... 18.1 16.6 68.9 42.4
----------- ----------- ----------- -----------

NET INCOME ................. $ 76.2 $ 25.1 $ 156.9 $ 69.9
=========== =========== =========== ===========

NET INCOME PER SHARE:

Basic .................... $ 1.95 $ 0.66 $ 4.03 $ 1.85

Diluted .................. $ 1.76 $ 0.62 $ 3.66 $ 1.74

DIVIDENDS DECLARED PER
COMMON SHARE ............. $ -- $ 4.00 $ -- $ 4.00

See accompanying notes to the condensed consolidated financial statements.

ANIXTER INTERNATIONAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 29, DECEMBER 30,
2006 2005
------------ -----------
(IN MILLIONS, EXCEPT SHARE AMOUNTS) (UNAUDITED)

ASSETS

CURRENT ASSETS
Cash and cash equivalents ........................ $ 27.8 $ 21.8
Accounts receivable (less allowances of
$17.7 and $19.6 in 2006 and 2005,
respectively) .................................. 1,015.7 772.3
Inventories ...................................... 901.7 711.5
Deferred income taxes ............................ 21.9 16.5
Other current assets ............................. 18.3 14.6
---------- ----------
Total current assets ........................ 1,985.4 1,536.7
Property and equipment, at cost .................... 201.9 194.7
Accumulated depreciation ........................... (144.3) (141.6)
---------- ----------
Net property and equipment .................. 57.6 53.1
Goodwill ........................................... 342.7 320.2
Other assets ....................................... 111.5 102.1
---------- ----------
$ 2,497.2 $ 2,012.1
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable ................................. $ 579.6 $ 436.0
Accrued expenses ................................. 211.2 168.1
---------- ----------
Total current liabilities ................... 790.8 604.1
Long-term debt ..................................... 724.7 625.1
Other liabilities .................................. 74.0 76.5
---------- ----------
Total liabilities ........................... 1,589.5 1,305.7

STOCKHOLDERS' EQUITY
Common stock -- $1.00 par value, 100,000,000
shares authorized, 39,272,455 and 38,378,182
shares issued and outstanding in 2006 and 2005,
respectively ................................... 39.3 38.4
Capital surplus .................................. 104.0 79.6
Retained earnings ................................ 750.9 594.0
Accumulated other comprehensive income (loss):
Foreign currency translation ................... 16.4 (1.5)
Minimum pension liability ...................... (5.0) (4.9)
Unrealized gain on derivatives ................. 2.1 0.8
---------- ----------
Total accumulated other comprehensive
income (loss) .............................. 13.5 (5.6)
---------- ----------
Total stockholders' equity .................. 907.7 706.4
---------- ----------
$ 2,497.2 $ 2,012.1
========== ==========

See accompanying notes to the condensed consolidated financial statements.

ANIXTER INTERNATIONAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

39 WEEKS ENDED
----------------------------
SEPTEMBER 29, SEPTEMBER 30,
2006 2005
------------ -------------
(IN MILLIONS)

OPERATING ACTIVITIES
Net income ........................................ $ 156.9 $ 69.9
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation ..................................... 14.6 13.4
Amortization of stock compensation ............... 8.4 6.1
Accretion of zero coupon convertible notes ....... 3.8 6.0
Amortization of intangible assets and deferred
financing costs ................................. 3.7 2.8
Deferred income taxes ............................ 1.8 9.3
Loss on extinguishment of debt ................... -- 1.2
Stock option income tax benefits ................. -- 5.6
Excess income tax benefit from employee
stock plans ..................................... (8.3) --
Changes in current assets and liabilities, net.... (214.7) (129.7)
Change in tax accruals related to IRS
settlement ...................................... (22.8) --
Other, net ....................................... (0.4) 5.7
-------- --------
Net cash used in operating activities ......... (57.0) (9.7)

INVESTING ACTIVITIES
Acquisition of businesses ........................ (29.6) (71.8)
Capital expenditures ............................. (16.9) (11.2)
-------- --------
Net cash used in investing activities ......... (46.5) (83.0)

FINANCING ACTIVITIES
Proceeds from long-term borrowings ............... 479.3 392.1
Repayment of long-term borrowings ................ (389.7) (387.4)
Proceeds from issuance of common stock ........... 12.5 12.0
Excess income tax benefit from employee
stock plans ..................................... 8.3 --
Payment of cash dividend ......................... (0.8) (0.1)
Deferred financing costs ......................... (0.1) (2.1)
Bond proceeds .................................... -- 199.6
Retirement of 7% zero coupon convertible notes.... -- (69.9)
Proceeds from interest rate hedges ............... -- 1.8
-------- --------
Net cash provided by financing activities ..... 109.5 146.0
-------- --------

INCREASE IN CASH AND CASH EQUIVALENTS ............... 6.0 53.3
Cash and cash equivalents at beginning
of period ........................................ 21.8 53.4
-------- --------
Cash and cash equivalents at end of period ........ $ 27.8 $ 106.7
======== ========

See accompanying notes to the condensed consolidated financial statements.

ANIXTER INTERNATIONAL INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION: The accompanying condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements included in Anixter International Inc.'s ("the Company") Annual
Report on Form 10-K for the year ended December 30, 2005. The condensed
consolidated financial information furnished herein reflects all adjustments
(consisting of normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the condensed consolidated
financial statements for the periods shown. The results of operations of any
interim period are not necessarily indicative of the results that may be
expected for a full fiscal year.

STOCK BASED COMPENSATION: In December 2004, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standard
("SFAS") No. 123 (Revised 2004), Share-Based Payment ("SFAS No. 123(R)"), which
became effective for annual reporting periods beginning after June 15, 2005. The
Company adopted SFAS No. 123(R) in the first quarter of fiscal 2006 using the
modified version of prospective application. Under this transition method,
compensation cost is recognized on or after the required effective date for the
portion of outstanding awards for which the requisite service has not yet been
rendered, based on the grant-date fair value of those awards previously
calculated under SFAS No. 123 for pro forma disclosure purposes. Also, in
accordance with the modified version of prospective application of adopting SFAS
123(R), the Company has classified the tax benefits received associated with
employee stock compensation as a financing cash flow item in its condensed
consolidated statement of cash flows for the 39 weeks ended September 29, 2006.
The financial statements for periods prior to the date of adoption have not been
restated in accordance with the modified prospective application.

In November 2005, FASB issued FSP 123(R)-3, Transition Election Related to
Accounting for the Tax Effects of Share-Based Payment Awards which describes an
alternative transition method for calculating the tax effects of stock-based
compensation pursuant to SFAS 123(R). Applying the provisions of FSP 123(R)-3
did not have a material impact on the Company's consolidated financial position,
results of operations or cash flows.

Prior to the adoption of SFAS 123(R), the Company elected to apply the
intrinsic value method of Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and its related interpretations in
accounting for its stock-based compensation plans. In accordance with the APB
Opinion No. 25, compensation cost of stock options issued were measured as the
excess, if any, of the quoted market price of the Company's stock at the date of
the grant over the option exercise price and was charged to operations over the
vesting period. In accordance with SFAS 123(R), the Company measures the cost of
all employee share-based payments to employees, including grants of employee
stock options, using a fair-value-based method. Compensation costs for the plans
have been determined based on the fair value at the grant date using the
Black-Scholes option pricing model and amortized on a straight-line basis over
the respective vesting period representing the requisite service period.

Based on the number of options outstanding at December 31, 2005, the
adoption of SFAS No. 123(R) by the Company resulted in additional expense of
less than $0.1 million and $0.7 million in the 13 and 39 weeks ended September
29, 2006, respectively. The remaining stock options outstanding for which the
remaining requisite service period had yet to be rendered at the beginning of
the year are insignificant. The effect of adopting SFAS No. 123(R) did not have
a material effect on the Company's income before taxes, net income, basic and
diluted earnings per share for the 13 weeks ended September 29, 2006. As a
result of adopting Statement 123(R) on December 31, 2005, the Company's income
before income taxes and net income for the 39 weeks ended September 29, 2006,
are $0.7 million and $0.4 million lower, respectively, than if it had continued
to account for share-based compensation under APB Opinion No. 25. Both basic and
diluted earnings per share for the 39 weeks ended September 29, 2006 are $0.01
lower than if the Company had continued to account for share-based compensation
under APB Opinion No. 25. For further information, see Note 9. "Preferred Stock
and Common Stock."

ANIXTER INTERNATIONAL INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Prior to the adoption of SFAS 123(R), the Company applied the
disclosure-only provisions of SFAS No. 123. Accordingly, since the exercise
price of the Company's grants equaled the stock price on the date of grant, no
compensation expense had been recognized in the condensed consolidated
statements of operations for the stock option plans. The pro forma disclosures
previously permitted under SFAS No. 123 are no longer an alternative to
financial statement recognition. However, pro forma net income and net income
per share amounts are presented in the table below for the comparative 13 and 39
weeks ended September 30, 2005 as if the Company had used a fair-value-based
method similar to the methods required under SFAS No. 123(R) to measure
compensation expense for employee stock incentive awards.

13 WEEKS ENDED 39 WEEKS ENDED
-------------- --------------
SEPTEMBER 30, SEPTEMBER 30,
2005 2005
------------- --------------

(IN MILLIONS, EXCEPT PER SHARE DATA)

BASIC EARNINGS PER SHARE:
Net income as reported ........................ $ 25.1 $ 69.9
Add: APB Opinion No. 25 Stock-based
employee compensation included in
net income, net ............................. 1.3 3.7
Deduct: SFAS No. 123 Stock-based employee
compensation expense, net ................... (2.0) (6.0)
-------- --------
Pro forma net income ....................... $ 24.4 $ 67.6
======== ========

BASIC EARNINGS PER SHARE:
As reported ................................. $ 0.66 $ 1.85
Pro forma ................................... $ 0.64 $ 1.79

DILUTED EARNINGS PER SHARE:
Net income as reported ........................ $ 25.1 $ 69.9
Add: APB Opinion No. 25 Stock-based
employee compensation included in net
income, net ................................. 1.3 3.7
Add: Interest impact of assumed conversion
of convertible notes ......................... -- 0.8
Deduct: SFAS No. 123 Stock-based employee
compensation expense, net ................... (2.0) (6.0)
-------- --------
Pro forma net income .......................... $ 24.4 $ 68.4
======== ========

DILUTED EARNINGS PER SHARE:
As reported ................................. $ 0.62 $ 1.74
Pro forma ................................... $ 0.60 $ 1.67

The weighted-average fair value of the Company's 2001 and 2002 stock options
was $14.92 and $14.74 per share, respectively, as estimated at the date of grant
using the Black-Scholes option pricing model with the following assumptions
applicable to the grants: expected stock price volatility of 46%; expected
dividend yield of zero; risk-free interest rate of 4.7%; and an average expected
life of 8 years.

ANIXTER INTERNATIONAL INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: In May 2005, the FASB issued SFAS
No. 154, Accounting for Changes and Error Corrections -- A Replacement of APB
Opinion No. 20 and FASB Statement No. 3 ("SFAS No. 154"). SFAS 154 requires
retrospective application to prior period financial statements of changes in
accounting principle, unless it is impracticable to determine either the
period-specific effects or the cumulative effect of the change. The provisions
of this statement became effective for the Company at the beginning of fiscal
2006 and did not have an effect on the Company's Condensed Consolidated
Financial Statements.

In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109 ("FIN
48"). FIN 48 requires that the tax benefit related to a position taken or
expected to be taken in a tax return of a Company be recognized in the financial
statements when it is more likely than not (i.e., a likelihood of more than
fifty percent) that the position would be sustained upon examination by tax
authorities. A recognized tax position is then measured at the largest amount of
benefit that is greater than fifty percent likely of being realized upon
ultimate settlement. The Company has not yet determined the impact of the
recognition and measurement requirements of FIN 48 on existing tax positions.
Upon adoption, the cumulative effect of applying the recognition and measurement
provisions of FIN 48, if any, shall be reflected as an adjustment to the opening
balance of retained earnings. FIN 48 requires that subsequent to initial
adoption a change in judgment that results in subsequent recognition,
derecognition or change in a measurement of a tax position taken in a prior
annual period (including any related interest and penalties) be recognized as a
discrete item in the period in which the change occurs.

FIN 48 also requires expanded disclosures including identification of tax
positions for which it is reasonably possible that total amounts of unrecognized
tax benefits will significantly change in the next twelve months, a description
of tax years that remain subject to examination by major tax jurisdiction, a
tabular reconciliation of the total amount of unrecognized tax benefits at the
beginning and end of each annual reporting period, the total amount of
unrecognized tax benefits that, if recognized, would affect the effective tax
rate and the total amounts of interest and penalties recognized in the
statements of operations and balance sheet. FIN 48 is effective for fiscal years
beginning after December 15, 2006 (i.e., the year beginning December 30, 2006
for the Company).

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value and expands the disclosures about fair value measurements
but does not change existing guidance as to whether or not an instrument is
carried at fair value. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. The Company is evaluating the provisions of SFAS No. 157 to
determine the impact, if any, on the Company's consolidated financial
statements.

In September 2006, the FASB issued SFAS No. 158, Employer's Accounting for
Defined Benefit Pension and Other Postretirement Plans (an amendment of FASB
Statements No. 87, 88, 106, and 132(R)) ("SFAS No. 158"). Under the provisions
of SFAS No. 158, balance sheet recognition of the funded status of a
single-employer defined benefit postretirement plan is required as an initial
adjustment to the ending balance of other comprehensive income, net of tax.
Subsequent changes in the funded status shall be recorded as a component of
comprehensive income to the extent the changes have not yet been recognized as a
component of net periodic cost pursuant to SFAS No. 87, Employers' Accounting
for Pensions, or SFAS No. 106, Employers' Accounting for Postretirement Benefits
Other than Pensions. An employer with publicly traded equity securities is
required to initially recognize the funded status of a defined benefit
postretirement plan and to provide the required disclosures as of the end of the
fiscal year ending after December 15, 2006, or December 29, 2006 for the
Company.

ANIXTER INTERNATIONAL INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

As described in Note 7 "Pension Plans," the Company has pension plans that
will be subject to the provisions of SFAS 158. At this time, the funded status
of these plans at fiscal year end December 29, 2006 cannot be determined.
However, based on the funded status of defined benefit pension plans as of
December 30, 2005 (the most recent measurement date), the Company would be
required to increase net liabilities for pension benefits, which would result in
an estimated decrease to stockholders' equity of approximately $25 million, net
of taxes, in the consolidated balance sheet. This estimate may vary from the
actual impact of implementing SFAS No. 158. The ultimate amounts recorded are
highly dependent on a number of assumptions, including the discount rates in
effect at December 29, 2006, the actual rate of return on our pension assets
during 2006 and the tax effects of the adjustment. Changes in these assumptions
and actual rate of return on plan assets since the Company's last measurement
date could increase or decrease the expected impact of implementing SFAS No. 158
in the consolidated financial statements at December 29, 2006.

In September 2006, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements
When Quantifying Misstatements in Current Year Financial Statements ("SAB 108"),
which provides interpretive guidance on how the effects of the carryover or
reversal of prior year misstatements should be considered in quantifying a
current year misstatement for the purpose of a materiality assessment. SAB 108
is effective for fiscal years ending after November 15, 2006, or December 29,
2006 for the Company. The Company does not believe SAB 108 will have a material
impact on the consolidated financial statements.

NOTE 2. INCOME PER SHARE

The following table sets forth the computation of basic and diluted income
per share:

13 WEEKS ENDED 39 WEEKS ENDED
-------------------------- ---------------------------
SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 30,
2006 2005 2006 2005
------------ ------------ ------------- ------------

(IN MILLIONS, EXCEPT PER
SHARE DATA)

BASIC INCOME PER SHARE:
Net income ............. $ 76.2 $ 25.1 $ 156.9 $ 69.9
Weighted-average
common shares
outstanding ........... 39.2 38.1 38.9 37.8
Net income per share ... $ 1.95 $ 0.66 $ 4.03 $ 1.85

DILUTED INCOME PER SHARE:
Net income ............. $ 76.2 $ 25.1 $ 156.9 $ 69.9
Net interest
impact of assumed
conversion of
convertible notes ..... -- -- -- 0.8
------- ------- -------- -------
Adjusted net income .... $ 76.2 $ 25.1 $ 156.9 $ 70.7
======= ======= ======== =======

Weighted-average
common shares
outstanding ........... 39.2 38.1 38.9 37.8
Effect of dilutive
securities:
Stock options
and units ........... 1.4 1.3 1.5 1.4
Convertible notes
due 2033 ............ 2.7 1.2 2.5 1.0
Convertible notes
due 2020 ............ -- -- -- 0.5
------- ------- -------- -------
Weighted-average
common shares
outstanding ........... 43.3 40.6 42.9 40.7
======= ======= ======== =======

Net income per share ... $ 1.76 $ 0.62 $ 3.66 $ 1.74

ANIXTER INTERNATIONAL INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The Convertible Notes due 2033 are convertible into 15.067 shares of the
Company's common stock in any calendar quarter if:

- the sales price of our common stock reaches specified thresholds;
- during any period in which the credit rating assigned to the Convertible
Notes due 2033 is below a specified level;
- the Convertible Notes due 2033 are called for redemption; or
- specified corporate transactions have occurred.

Upon conversion, the Company is required to deliver an amount of cash equal
to the accreted principal amount and a number of common stock shares with a
value equal to the amount, if any, by which the conversion value exceeds the
accreted principal amount at the time of the conversion. During the 13 weeks
ended September 29, 2006, the sales price of our common stock met specified
thresholds and 5,000 Convertible Notes due 2033 were converted. At the time of
conversion, the Company was required to deliver approximately $2.1 million of
cash (equal to the accreted principal value amount) and approximately 38,000
shares of common stock (equal to the conversion value greater than the accreted
value).

As a result of the conversion value exceeding the accreted principal, 2.7
million and 2.5 million additional shares related to the Convertible Notes due
2033 have been included in the diluted weighted average common shares
outstanding for the 13 and 39 weeks ended September 29, 2006, respectively. In
the corresponding periods in 2005, 1.2 million and 1.0 million additional shares
related to the Convertible Notes due 2033 have been included in the dilutive
weighted average common shares outstanding for the 13 and 39 weeks ended,
respectively.

In the 39 weeks ended September 30, 2005, the Company included 0.5 million
of common stock equivalents, relating to its 7% zero coupon convertible notes
due 2020 ("Convertible Notes due 2020"), in its calculation of diluted income
per share because the effect was dilutive. Because the Convertible Notes due
2020 were included in the diluted shares outstanding, the related $0.8 million
net interest expense was excluded from the determination of net income in the
calculation of diluted income per share for the 39 weeks ended September 30,
2005. The impact of the Convertible Notes due 2020 was less than $0.01 per
diluted share for the 39 weeks ended September 30, 2005. There was no dilutive
effect for the 13 weeks ended September 30, 2005. The Convertible Notes due 2020
were retired on June 28, 2005.

In the 13 weeks ended September 29, 2006 and September 30, 2005, the Company
issued 0.2 million and 0.3 million shares, respectively, due to stock option
exercises. In the 39 weeks ended September 29, 2006 and September 30, 2005, the
Company issued 0.9 million and 0.8 million shares, respectively, due to stock
option exercises and vesting of stock units.

NOTE 3. COMPREHENSIVE INCOME

Comprehensive income, net of tax, consisted of the following:

13 WEEKS ENDED 39 WEEKS ENDED
--------------------------- --------------------------
(IN MILLIONS) SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 29 SEPTEMBER 30,
2006 2005 2006 2005
------------ ------------ ------------ ------------

Net income ............. $ 76.2 $ 25.1 $ 156.9 $ 69.9
Change in cumulative
translation
adjustment ............ 4.7 3.1 17.9 (15.7)
Change in fair market
value of derivatives... (0.7) (0.7) 1.3 0.9
Change in minimum
pension liability ..... (0.1) -- (0.1) --
------- ------- -------- -------
Comprehensive income ... $ 80.1 $ 27.5 $ 176.0 $ 55.1
======= ======= ======== =======

ANIXTER INTERNATIONAL INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

NOTE 4. INCOME TAXES

During the 13 weeks ended September 29, 2006, the Company entered into a
settlement with the Internal Revenue Service ("IRS") as to the federal income
tax liabilities of the Company and its subsidiaries for the tax years 1996
through 1998. Under the terms of this settlement, the Company will be able to
deduct certain losses on its U.S. tax return arising from changes in the IRS
regulations that became effective in 1996. Primarily as a result of this
settlement, the Company has reduced the third quarter tax provision by $18.1
million. The interest income portion of this settlement of $7.7 million
(after-tax impact of $4.7 million) is reflected in the "Other, net" line in the
condensed consolidated statement of operations for the 13 weeks ended September
29, 2006. The total effect on the third quarter net income was a gain of $22.8
million, or 53 cents per diluted share. The 1996-1998 refund has been approved
by the Joint Committee on Taxation of the U. S. Congress and is expected to be
received in the fourth quarter of 2006.

The effective tax rate is 19.3% and 30.5% for the 13 and 39 weeks ended
September 29, 2006, respectively, compared to 39.8% and 37.8% for the
corresponding periods in 2005. The decrease in the effective tax rate for the 13
and 39 weeks ended September 29, 2006 is due to the effect of the tax refund
from the IRS. The tax rate for the 39 weeks ended September 30, 2005 had been
decreased due to a $1.4 million tax credit resulting from a favorable tax ruling
in Europe during the second quarter of 2005. Excluding the tax refund in 2006
and tax credit in 2005, the change in tax rate increased net income by
approximately $1.2 million, or $0.03 per diluted share, and $1.0 million, or
$0.02 per diluted share for the 13 and 39 weeks ended September 29, 2006,
respectively, compared to the corresponding periods in 2005.

NOTE 5. ACQUISITION OF BUSINESSES

In May of 2006, the Company acquired IMS, Inc. ("IMS"), a wire and cable
distributor in Connecticut, for $25.3 million and held back $3.0 million to
cover various representations and warranties. During the 13 weeks ended
September 29, 2006, certain representations were settled and the Company paid an
additional $0.5 million leaving $2.5 million of holdbacks to cover remaining
representations and warranties outstanding at September 29, 2006. In addition, a
net asset adjustment and a potential earn-out payment will be made during the
next seven months that is expected to increase the purchase price by less than
$2.0 million. IMS complements the Company's existing electrical wire and cable
business in North America while employing approximately 100 people. Included in
the results of the Company for the 13 and 39 weeks ended September 29, 2006 are
sales of $13.6 million and $18.3 million, respectively, and operating income of
$1.3 million and $1.7 million, respectively. On a preliminary basis, the Company
has estimated tangible net assets acquired at $7.3 million. The Company may make
adjustments to this preliminary valuation once it completes its review of fixed
assets. Based upon a preliminary third party valuation, intangible assets have
been recorded as follows:

- $10.6 million of intangible assets with a finite life of 15 years
(customer relationships); and
- $10.4 million of goodwill.

In addition to the above, the Company paid $3.8 million for a small
acquisition in Eastern Europe during the 39 weeks ended September 29, 2006.

On July 8, 2005, the Company acquired Infast, a UK-based distributor of
fasteners and other "C" class inventory components to original equipment
manufacturers. Based on the offer price of 34 pence per Infast share, the
Company paid approximately $71.8 million for all of the outstanding shares of
Infast, including transaction-related costs. Included in the results of the
Company for the 13 and 39 weeks ended September 29, 2006 are Infast sales of
$66.9 million and $207.1 million, respectively, and operating income of $2.6
million and $4.2 million, respectively. During the third quarter of 2005, Infast
contributed sales and operating income of $60.0 million and $1.0 million,
respectively.

These acquisitions were accounted for as purchases and their respective
results of operations are included in the condensed consolidated financial
statements from the dates of acquisition. Had these acquisitions occurred at the
beginning of the year of each acquisition, the impact on the Company's operating
results would not have been significant.

ANIXTER INTERNATIONAL INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

NOTE 6. COMMITMENTS AND CONTINGENCIES

As a result of the acquisition of Infast, the Company assumed a guarantee
related to a lease obligation of a previously owned operating division of
Infast. During the first quarter of 2006, the former Infast affiliate defaulted
on its lease obligation and the Company received $3.0 million that was held in
escrow in the event of such default. After taking into account the receipt of
the escrow funds and the additional fair value liability established at
acquisition date, the Company has estimated the future sublease revenue that it
expects to realize during the lease term to be less than the amount due under
the guarantee. Therefore, during the first quarter of 2006, the Company recorded
a $1.1 million provision related to this lease guarantee.

NOTE 7. PENSION PLANS

The Company has various defined benefit and defined contributory pension
plans. The defined benefit plans of the Company are the Anixter Inc. Pension
Plan, Executive Benefit Plan and Supplemental Executive Retirement Plan
(together the "Domestic Plans") and various pension plans covering employees of
foreign subsidiaries ("Foreign Plans"). The majority of the Company's pension
plans are non-contributory and cover substantially all full-time domestic
employees and certain employees in other countries. Retirement benefits are
provided based on compensation as defined in both the Domestic and Foreign
Plans. The Company's policy is to fund all plans as required by the Employee
Retirement Income Security Act of 1974 ("ERISA"), the Internal Revenue Service
and applicable foreign laws. Assets in the various plans consisted primarily of
equity securities and fixed income fund investments.

Components of net periodic pension cost are as follows:

13 WEEKS ENDED
----------------------------------------------------------------------------------
DOMESTIC FOREIGN TOTAL
-------------------------- -------------------------- --------------------------
SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 30,
2006 2005 2006 2005 2006 2005
------------ ------------ ------------ ------------ ------------ ------------
(IN MILLIONS)

Service cost ......................... $ 1.6 $ 1.2 $ 1.1 $ 1.2 $ 2.7 $ 2.4
Interest cost ........................ 2.3 1.5 1.7 1.3 4.0 2.8
Expected return on plan assets ....... (2.3) (1.9) (1.7) (1.1) (4.0) (3.0)
Net amortization...................... 0.7 0.3 0.2 -- 0.9 0.3
------ ------ ------ ------ ------- ------
Net periodic cost..................... $ 2.3 $ 1.1 $ 1.3 $ 1.4 $ 3.6 $ 2.5
====== ====== ====== ====== ======= ======

39 WEEKS ENDED
----------------------------------------------------------------------------------
DOMESTIC FOREIGN TOTAL
-------------------------- -------------------------- --------------------------
SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 30,
2006 2005 2006 2005 2006 2005
------------ ------------ ------------ ------------ ------------ ------------
(IN MILLIONS)

Service cost ......................... $ 4.8 $ 4.2 $ 4.0 $ 3.7 $ 8.8 $ 7.9
Interest cost ........................ 6.4 5.5 6.7 3.8 13.1 9.3
Expected return on plan assets........ (6.7) (5.5) (6.7) (3.3) (13.4) (8.8)
Net amortization...................... 1.5 0.9 0.5 0.2 2.0 1.1
------ ------ ------ ------ ------- ------
Net periodic cost..................... $ 6.0 $ 5.1 $ 4.5 $ 4.4 $ 10.5 $ 9.5
====== ====== ====== ====== ======= ======

In the 39 weeks ended September 29, 2006, the Company made contributions of
approximately $9.8 million to the Anixter Inc. Pension Plan and approximately
$7.5 million to its Foreign Plans. Currently, the Company estimates that it will
make additional contributions in 2006 of approximately $1.5 million to the
Anixter Inc. Pension Plan and approximately $1.0 million to its Foreign Plans.

ANIXTER INTERNATIONAL INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

NOTE 8. SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC.

The Company guarantees, fully and unconditionally, substantially all of the
debt of its subsidiaries, which includes Anixter Inc. The Company has no
independent assets or operations and all other subsidiaries other than Anixter
Inc. are minor. Certain debt agreements entered into by Anixter Inc. contain
various restrictions including restrictions on payments to the Company. Such
restrictions have not had, and are not expected to have, an adverse impact on
the Company's ability to meet its cash obligations. The following summarizes the
financial information for Anixter Inc.:

ANIXTER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS) SEPTEMBER 29, DECEMBER 30,
2006 2005
------------- -----------
(UNAUDITED)

ASSETS:
Current assets ............................... $ 2,008.2 $ 1,541.5
Property, net ................................ 57.3 52.7
Goodwill and other intangibles ............... 382.8 350.4
Other assets ................................. 78.5 79.9
---------- ----------
$ 2,526.8 $ 2,024.5
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities .......................... $ 782.6 $ 582.5
Subordinated notes payable to parent ......... 40.0 30.5
Long-term debt ............................... 567.2 469.3
Other liabilities ............................ 88.0 89.8
Stockholders' equity ......................... 1,049.0 852.4
---------- ----------
$ 2,526.8 $ 2,024.5
========== ==========

ANIXTER INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

13 WEEKS ENDED 39 WEEKS ENDED
--------------------------- ---------------------------
(IN MILLIONS) SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 30,
2006 2005 2006 2005
------------- ------------- ------------- -------------

Net sales.................. $ 1,330. 5 $ 1,009.2 $ 3,640.8 $ 2,821.8
Operating income........... $ 97. 3 $ 50.1 $ 250.4 $ 138.3
Income before
income taxes.............. $ 95. 5 $ 43.2 $ 229.9 $ 115.4
Net income................. $ 75. 8 $ 25.7 $ 157.8 $ 71.2

NOTE 9. PREFERRED STOCK AND COMMON STOCK

Preferred Stock

The Company has the authority to issue 15.0 million shares of preferred
stock, par value $1.00 per share, none of which was outstanding as of September
29, 2006 and December 30, 2005.

ANIXTER INTERNATIONAL INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Common Stock

The Company has the authority to issue 100.0 million shares of common stock,
par value $1.00 per share, of which 39.3 million shares and 38.4 million shares
were outstanding as of September 29, 2006 and December 30, 2005, respectively.

No shares were repurchased in 2006 or 2005. However, the Company may
purchase additional shares with the volume and timing dependent on market
conditions.

Stock Units

Prior to 2003, the Company granted stock options to employees. Beginning in
2003, the Company granted stock units in lieu of employee stock options under
the 2001 Stock Incentive Plan. The Company granted approximately 232,346 and
262,183 stock units to employees in the 39 weeks ended September 29, 2006 and
September 30, 2005, respectively, with a grant-date fair value of $46.29 and
$37.39 per share, respectively. The grant-date value of stock units is amortized
and the stock units converted to outstanding shares of common stock on a
one-for-one basis over either a four-year or six-year vesting period from the
date of grant based on the specific terms of the grant. During the 13 and 39
weeks ended September 29, 2006, total compensation expense associated with the
stock units was $2.2 million and $6.3 million, respectively. During the 13 and
39 weeks ended September 30, 2005, the total compensation expense associated
with the stock units was $1.8 million and $5.0 million, respectively.

In 1996, the Company adopted a Director Stock Unit Plan to pay its
non-employee directors annual retainer fees in the form of stock units.
Currently, these units are granted quarterly. These stock units convert to
common stock outstanding of the Company at a pre-arranged time selected by each
director. Stock units were granted to ten directors in the 13 and 39 weeks ended
September 29, 2006 and September 30, 2005. The aggregate value at grant date was
$0.3 million in the 13 weeks ended September 29, 2006 and September 30, 2005.
The aggregate value at grant date was $1.0 million and $0.6 million in the 39
week periods ending September 29, 2006 and September 30, 2005, respectively.
Compensation expense associated with the director stock units was $0.3 million
for the 13 weeks ended September 29, 2006 and September 30, 2005. During the 39
weeks ended September 29, 2006, and September 30, 2005, total compensation
expense associated with the director stock units was $1.0 million and $1.1
million, respectively.

The following table summarizes the activity under the director and employee
stock unit plans:

WEIGHTED WEIGHTED
DIRECTOR AVERAGE EMPLOYEE AVERAGE
STOCK GRANT DATE STOCK GRANT DATE
UNITS VALUE UNITS VALUE
-------- ---------- -------- ----------
(UNITS IN THOUSANDS)

Balance at December 30, 2005 .... 133.0 $ 25.77 649.6 $ 31.62
Granted ......................... 8.4 39.12 232.3 46.29
Converted ....................... -- -- (154.1) 27.04
Canceled ........................ -- -- (1.6) 30.62
-------- --------
Balance at March 31, 2006 ....... 141.4 $ 26.57 726.2 $ 37.29
-------- --------
Granted ......................... 6.9 47.78 -- --
Converted ....................... (31.2) 22.11 -- --
Canceled ........................ -- -- (10.1) 39.39
-------- --------
Balance at June 30, 2006 ........ 117.1 $ 29.01 716.1 $ 37.26
-------- --------
Granted ......................... 7.0 47.46 -- --
Converted ....................... -- -- -- --
Canceled ........................ -- -- (17.0) 36.73
-------- --------
Balance at September 29, 2006 ... 124.1 $ 30.05 699.1 $ 37.27
======== ========

ANIXTER INTERNATIONAL INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Stock Options

On May 18, 2006, the Company's stockholders approved the 2006 Stock
Incentive Plan (the "Incentive Plan"). A total of 1.7 million shares of the
Company's common stock may be issued pursuant to the Incentive Plan.

At September 29, 2006, the Company had stock incentive plans that reserve
1.9 million shares for additional stock option awards or stock grants. Options
previously granted under these plans have been granted with exercise prices at,
or higher than, the fair market value of the common stock on the date of grant.
All options expire ten years after the date of grant. The Company generally
issues new shares to satisfy stock option exercises as opposed to adjusting
treasury shares. In accordance with SFAS 123(R), the fair value of stock option
grants is amortized over the respective vesting period representing the
requisite service period.

On March 1, 2006, the Company granted an additional 168,000 stock options to
employees and began amortizing the grant-date fair market value of approximately
$3.5 million over the six-year vesting period representing the requisite service
period. The weighted-average fair value of the 2006 stock option grant was
$21.07 per share which was estimated at the date of grant using the
Black-Scholes option pricing model with the following assumptions: expected
stock price volatility of 34%; expected dividend yield of zero; risk-free
interest rate of 4.6%; and an average expected life of 7 years. Compensation
expense associated with the 2006 option grant was $0.1 million and $0.3 million
for the 13 and 39 week period ended September 29, 2006, respectively.

The following table summarizes the activity under the employee stock option
plan:

WEIGHTED WEIGHTED
AVERAGE AVERAGE AGGREGATE
EMPLOYEE EXERCISE REMAINING INTRINSIC
OPTIONS PRICE LIFE VALUE
----------- --------- --------- -------------
(OPTIONS IN (IN THOUSANDS)
THOUSANDS)

Balance at December 30, 2005.... 3,369.6 $ 18.55
Granted......................... 168.0 46.29
Exercised....................... (400.3) 17.65
Canceled........................ (0.7) 22.39
---------
Balance at March 31, 2006....... 3,136.6 $ 20.15 4.5 years $ 86,663.2
Granted......................... -- --
Exercised....................... (153.1) 17.83
Canceled........................ -- --
----------
Balance at June 30, 2006........ 2,983.5 $ 20.27 4.5 years $ 81,112.0
---------
Granted......................... -- --
Exercised....................... (164.1) 16.38
Canceled........................ -- --
---------
Balance at September 29, 2006... 2,819.4 $ 20.50 4.6 years $ 101,415.1
=========

Options exercisable at
September 29, 2006:
2006............................. 2,647.0 $ 18.87 4.5 years $ 99,540.8

The aggregate intrinsic value in the table above represents the total
pre-tax intrinsic value (the difference between the Company's closing stock
price on the last trading day each fiscal quarter of 2006 and the exercise
price, multiplied by the number of in-the-money options) that would have been
received by the option holders had all option holders exercised their options on
March 31, 2006, June 30, 2006 and September 29, 2006, respectively. This amount
changes based on the fair market value of the Company's stock which was $47.78,
$47.46 and $56.47 at March 31, 2006, June 30, 2006 and September 29, 2006,
respectively. The total intrinsic value of options exercised for the 13 weeks
ended September 29, 2006 and September 30, 2005 was $5.6 million and $6.0
million, respectively. The total intrinsic value of options exercised for the 39
weeks ended September 29, 2006 and September 30, 2005 was $21.6 million and
$14.4 million, respectively.

ANIXTER INTERNATIONAL INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Summary of Non-Vested Shares

The following table summarizes the activity of unvested employee stock units
and options:

WEIGHTED
NON-VESTED AVERAGE GRANT
SHARES DATE FAIR VALUE
-------------- ---------------
(IN THOUSANDS)

Non-vested shares at December 30, 2005 .... 956.7 $ 28.67
Granted ................................... 400.3 46.29
Vested .................................... (441.5) 24.01
Forfeited ................................. (2.3) 28.08
---------
Non-vested shares at March 31, 2006 ....... 913.2 $ 38.58
---------
Granted ................................... -- --
Vested .................................... (3.5) 25.50
Forfeited ................................. (10.1) 39.39
---------
Non-vested shares at June 30, 2006 ........ 899.6 $ 38.63
---------
Granted ................................... -- --
Vested .................................... (11.1) 18.37
Forfeited ................................. (17.0) 36.73
---------
Non-vested shares at September 29, 2006 ... 871.5 $ 38.92
=========

As of September 29, 2006, there was $17.4 million of total unrecognized
compensation cost related to unvested stock units and options granted to
employees which is expected to be recognized over a weighted average period of
2.8 years.

NOTE 10. BUSINESS SEGMENTS

The Company is engaged in the distribution of communications products,
electrical and electronic wire and cable products and "C" Class inventory
components from top suppliers to contractors and installers, and also to end
users including manufacturers, natural resources companies, utilities and
original equipment manufacturers. The Company is organized by geographic
regions, and accordingly, has identified North America (United States and
Canada), Europe and Emerging Markets (Asia Pacific and Latin America) as
reportable segments. The Company obtains and coordinates financing, tax,
information technology, legal and other related services, certain of which are
rebilled to subsidiaries. Certain corporate expenses are allocated to the
segments based primarily on specific identification, projected sales and
estimated use of time. Interest expense and other non-operating items are not
allocated to the segments or reviewed on a segment basis. Intercompany
transactions are not significant.

ANIXTER INTERNATIONAL INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Segment information for the 13 and 39 weeks ended September 29, 2006 and
September 30, 2005 was as follows:

(IN MILLIONS) 13 WEEKS ENDED 39 WEEKS ENDED
------------------------------ --------------------------
SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 30,
2006 2005 2006 2005
-------------- -------------- ------------ ------------

NET SALES:
United States ...... $ 840.0 $ 646.1 $ 2,285.2 $ 1,829.4
Canada ............. 151.7 101.4 408.0 272.8
---------- ---------- ---------- ----------
North America .... 991.7 747.5 2,693.2 2,102.2
Europe ............. 244.5 193.8 704.6 526.8
Emerging Markets ... 94.3 67.9 243.0 192.8
---------- ---------- ---------- ----------
$ 1,330.5 $ 1,009.2 $ 3,640.8 $ 2,821.8
========== ========== ========== ==========

OPERATING INCOME:
United States ...... $ 57.3 $ 36.3 $ 152.8 $ 94.1
Canada ............. 20.3 6.3 48.0 18.4
---------- ---------- ---------- ----------
North America .... 77.6 42.6 200.8 112.5
Europe ............. 12.0 3.9 29.9 15.5
Emerging Markets ... 6.5 2.4 16.0 6.7
---------- ---------- ---------- ----------
$ 96.1 $ 48.9 $ 246.7 $ 134.7
========== ========== ========== ==========

SEPTEMBER 29, DECEMBER 30,
2006 2005
------------ ------------

TOTAL ASSETS:
United States...... $ 1,557.4 $ 1,272.5
Canada............. 229.7 169.2
---------- ----------
North America.... 1,787.1 1,441.7
Europe............. 540.2 422.2
Emerging Markets... 169.9 148.2
---------- ----------
$ 2,497.2 $ 2,012.1
========== ==========

NOTE 11. SUBSEQUENT EVENT

On October 31, 2006, the Company announced that it had acquired all of the
outstanding shares of MFU Holding S.p.A. ("MFU"), a privately held fastener
distributor in Italy. The Company paid approximately $58 million in cash
consideration for MFU and assumed approximately $11 million of outstanding debt
obligations. The purchase of the shares was funded from additional borrowings
under the Company's revolving credit facilities. MFU's fastener distribution
business complements the Company's existing product offerings in Europe as well
as our value-added services and inventory management programs.

ANIXTER INTERNATIONAL INC.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

The following is a discussion of the historical results of operations and
financial condition of Anixter International Inc. (the "Company") and factors
affecting the Company's financial resources. This discussion should be read in
conjunction with the condensed consolidated financial statements, including the
notes thereto, set forth herein under "Financial Statements" and the Company's
Annual Report on Form 10-K for the year ended December 30, 2005.

ACQUISITION OF BUSINESSES

- $10.6 million of intangible assets with a finite life of 15 years
(customer relationships); and
- $10.4 million of goodwill.

In addition to the above, the Company paid $3.8 million for a small
acquisition in Eastern Europe during the 39 weeks ended September 29, 2006.

FINANCIAL LIQUIDITY AND CAPITAL RESOURCES

Overview

As a distributor, the Company's use of capital is largely for working
capital to support its revenue base. Capital commitments for property, plant and
equipment are limited to information technology assets, warehouse equipment,
office furniture and fixtures and leasehold improvements, since the Company
operates from leased facilities. Therefore, in any given reporting period, the
amount of cash consumed or generated by operations will primarily be due to
changes in working capital as a result of the rate of sales increase or decline.

In periods when sales are increasing, the expanded working capital needs
will be funded first by cash from operations, secondly from additional
borrowings and lastly from additional equity offerings. Also, the Company will,
from time to time, issue or retire borrowings or equity in an effort to maintain
a cost-effective capital structure consistent with its anticipated capital
requirements.

ANIXTER INTERNATIONAL INC.

Cash Flow

Consolidated net cash used in operating activities was $57.0 million in the
39 weeks ended September 29, 2006 compared to $9.7 million in the same period in
2005. The increase in cash flow used in operations is primarily due to the
increase in working capital (accounts receivable, inventory, accounts payable
and other current assets and liabilities) needed to support the 29% increase in
sales.

Consolidated net cash used in investing activities was $46.5 million in the
39 weeks ended September 29, 2006 compared to $83.0 million in the corresponding
period in 2005. In the 39 weeks ended September 29, 2006, the Company spent
$29.6 million to acquire IMS and a small business in Eastern Europe. In the
corresponding period in 2005, the Company purchased the shares of Infast for
$71.8 million, including transaction related costs. Capital expenditures
increased $5.7 million in the 39 weeks ended September 29, 2006 as compared to
the year ago period. Capital expenditures are expected to be approximately $25
million in 2006 as the Company invests in the consolidation of certain
facilities in North America and Europe and invests in system upgrades and new
software to support its infrastructure.

Consolidated net cash provided by financing activities was $109.5 million in
the 39 weeks ended September 29, 2006 compared to $146.0 million in the
corresponding period in 2005. Proceeds from the issuance of common stock
relating to the exercise of stock options were $12.5 million in the 39 weeks
ended September 29, 2006 compared to $12.0 million in the corresponding period
in 2005. The 39 weeks ended September 29, 2006 includes $8.3 million of cash
provided from the income tax benefit associated with employee stock plans as a
result of the Company's adoption of Statement of SFAS 123(R). In 2005, the tax
benefit was classified in operating activities. In the 39 weeks ended September
29, 2006, the Company increased borrowings under its bank revolving lines of
credit and accounts receivable securitization facility by $89.6 million compared
to an increase of $4.7 million in the corresponding period in 2005. In the 39
weeks ended September 30, 2005, the Company issued $200.0 million of 5.95%
unsecured senior notes due 2015 ("Senior Notes"). The proceeds of $199.6 million
were used to reduce borrowings under revolving lines of credit, redeem the
Convertible Notes due 2020 for $69.9 million and acquire the shares of Infast.
Issuance costs related to the offering were $2.1 million, which were partially
offset by proceeds of $1.8 million resulting from entering into an interest rate
hedge prior to the offering.

Financings

On February 24, 2005, the Company's primary operating subsidiary, Anixter
Inc., issued the $200.0 million Senior Notes, which are fully and
unconditionally guaranteed by the Company. Interest on the Senior Notes is
payable semi-annually on March 1 and September 1 of each year, commencing
September 1, 2005. Net issuance costs of approximately $0.3 million associated
with the Senior Notes are being amortized through March 1, 2015 using the
straight-line method.

At September 29, 2006, the primary liquidity source for Anixter is the
$275.0 million, five-year bank revolving credit agreement, of which $105.5
million was outstanding. Facility fees of 27.5 basis points payable on the
five-year revolving credit agreement totaled $0.6 million in the 39 weeks ended
September 29, 2006 and September 30, 2005 and were included in interest expense
in the condensed consolidated statements of operations.

In November of 2005, Anixter Canada Inc. entered into a $40.0 million
(Canadian dollar) unsecured revolving credit facility maturing on June 18, 2009
for general corporate purposes and to finance, in part, the payment of a
dividend to Anixter Inc. The Canadian dollar borrowing rate under the agreement
is the BA/CDOR rate plus the applicable bankers' acceptance fee (currently 125
basis points) or the prime rate plus the applicable margin (currently 27.5 basis
points). The borrowing rate for U.S. dollar advances is the base rate plus the
applicable margin. In addition, there are standby fees on the unadvanced balance
currently equal to 27.5 basis points. At September 29, 2006 and December 30,
2005, $28.5 million and $25.8 million (U.S. dollar equivalent) was borrowed
under the facility, respectively.

ANIXTER INTERNATIONAL INC.

Excluding the primary $275.0 million revolving credit facility and the $40.0
million (Canadian dollar) facility at September 29, 2006 and December 30, 2005,
certain foreign subsidiaries had approximately $42.7 million and $30.5 million,
respectively, available under bank revolving lines of credit, $42.3 million and
$2.9 million of which was borrowed and included in long-term debt outstanding at
September 29, 2006 and December 30, 2005, respectively.

In October 2000, the Company entered into an accounts receivable
securitization program. The program allows the Company to sell, on an ongoing
basis without recourse, a majority of the accounts receivable originating in the
United States to Anixter Receivables Corporation ("ARC"), a wholly owned,
bankruptcy-remote special purpose entity. The assets of ARC are not available to
creditors of Anixter in the event of bankruptcy or insolvency proceedings. ARC
may in turn sell an interest in these receivables to a financial institution for
proceeds of up to $225.0 million. ARC is consolidated for accounting purposes
only in the financial statements of the Company. The average outstanding funding
extended to ARC during the 39 weeks ended September 29, 2006 and September 30,
2005 was approximately $170.3 million and $115.5 million, respectively. The
effective rate on the ARC funding was 5.6% and 3.7% in the 39 weeks ended
September 29, 2006 and September 30, 2005, respectively.

The Company's revolving credit agreements require certain covenant ratios to
be maintained. The Company is in compliance with all of these covenant ratios
and believes that there is adequate margin between the covenant ratios and the
actual ratios given the current trends of the business. Under the leverage ratio
requirement of the primary bank revolving credit agreement, as of September 29,
2006, the total availability of all revolving lines of credit at Anixter was
permitted to be borrowed, of which $153.8 million may be used to pay dividends
to the Company. The Company's debt-to-total capitalization decreased from 47.0%
at December 30, 2005 to 44.6% at September 29, 2006.

Consolidated interest expense was $10.0 million and $6.9 million in the
third quarter of 2006 and 2005, respectively, and $27.5 million and $18.9
million for the 39 weeks ended September 29, 2006 and September 30, 2005,
respectively. The increase in interest expense is primarily due to a combination
of higher debt levels and modestly higher interest rates on the percentage of
our borrowings that are based on variable rates. While interest rates on
approximately two thirds of our borrowings were fixed at the end of the third
quarter in 2006, our weighted average cost of borrowings increased modestly to
5.5% from 5.0% in the third quarter of 2005.

THIRD QUARTER 2006 RESULTS OF OPERATIONS

OVERVIEW

The Company competes with distributors and manufacturers who sell products
directly or through existing distribution channels to end users or other
resellers. The Company's relationship with the manufacturers for which it
distributes products could be affected by decisions made by these manufacturers
as the result of changes in management or ownership as well as other factors.
Although relationships with its suppliers are good, the loss of a major supplier
could have a temporary adverse effect on the Company's business, but would not
have a lasting impact since comparable products are available from alternate
sources. In addition to competitive factors, future performance could be subject
to economic downturns and possible rapid changes in applicable technologies. For
further information, see Item 1A "Risk Factors" in the Company's Annual Report
on Form 10-K for the year ended December 30, 2005.

During the third quarter of 2006, the Company continued to experience very
solid, broad-based sales growth in nearly all of the end markets it serves and
made continued progress on initiatives to grow its security and fastener
businesses and supply chain service offerings. Third quarter growth was
particularly strong in the electrical wire and cable market due to strong end
market customer demand, global expansion of the markets served and higher copper
prices. The Company's success in these areas during the third quarter
contributed to record quarterly sales and operating income of $1,330.5 million
and $96.1 million, respectively.

ANIXTER INTERNATIONAL INC.

The Company's recent operating results, however, have been favorably
affected by the rise in commodity prices, primarily copper, which are components
in some of the products sold. As current inventory purchase costs increase due
to higher commodity prices, the Company's percentage mark-up to customers
remains relatively constant, which would result in higher sales revenue and
gross profit. In addition, existing inventory purchased at previously lower
prices and sold as prices increase would result in a higher gross profit margin.
Conversely, a decrease in commodity prices in a short period of time would have
the opposite effect, negatively affecting results.

The Company estimates that higher copper prices added $68 million to its
electrical and electronic wire and cable sales during the 13 weeks ended
September 29, 2006 versus the year ago quarter. The incremental sales added an
estimated $18 million to operating income in the third quarter. These amounts
reflect our best estimates of the effects of higher copper prices. There is no
exact measure of the effect of higher copper prices, as there are thousands of
transactions in any given quarter, each of which has various factors involved in
the individual pricing decisions.

Unlike the second quarter of 2006, where the sharp run up in copper prices
during the quarter created significant gains from the sell-through of lower cost
electrical and electronic wire and cable inventory, the third quarter of 2006
has experienced relatively flat copper prices and yielded only minor amounts of
such gains. Conversely, since copper prices in the third quarter of 2006 were at
a consistently high level throughout the quarter, the effect of copper pricing
was greater, in both sales and gross profit, compared to the second quarter of
2006 when, throughout that quarter, the Company saw a rapid escalation in copper
prices. This effect occurred even though the year-to-year difference in the
average quarterly copper prices, in both the second and third quarters, was
nearly identical.

The impact of higher copper prices on third quarter operating profits should
in large part repeat when compared to prior year results so long as average
copper prices in the coming quarters continues to approximate copper prices in
the third quarter. To the extent that future copper prices are higher or lower
than the average of the third quarter, then, all other things being equal,
earnings will be higher or lower in future periods. In the event that the change
in copper prices is sudden and significant, then there could be future inventory
gains or losses from the sell-through of inventory purchased in prior months.

CONSOLIDATED RESULTS OF OPERATIONS

13 WEEKS ENDED
-----------------------------------------
SEPTEMBER 29, SEPTEMBER 30, PERCENT
2006 2005 CHANGE
------------- ------------- -------
(IN MILLIONS)

Net sales....................... $ 1,330.5 $ 1,009.2 31.8%
Gross profit.................... $ 320.5 $ 239.6 33.7%
Operating expenses.............. $ 224.4 $ 190.7 17.6%
Operating income................ $ 96.1 $ 48.9 96.7%

Net Sales: The Company's net sales during the third quarter of 2006
increased $321.3 million, or 31.8%, to $1,330.5 million from $1,009.2 million in
the same period in 2005. The acquisition of IMS in May 2006 accounted for $13.6
million of the increase while favorable effects of foreign exchange rates
contributed $21.1 million to third quarter sales as compared to the year ago
period. Excluding the acquisition of IMS and the favorable effects of foreign
exchange rates, the Company's net sales increased $286.6 million, or
approximately 28.4%, in the third quarter of 2006 as compared to the prior year.
The factors driving our strong organic growth were consistent with those the
Company has

ANIXTER INTERNATIONAL INC.

seen the past few quarters. In the most recent quarter, the Company experienced
very strong growth in larger project business, particularly as it relates to
data center builds in the enterprise cabling market and energy and natural
resources customers within our electrical and electronic wire and cable market.
At the same time, the Company continues to experience strong growth in security
and OEM supply sales. The Company estimates higher copper prices accounted for
an estimated $68 million of our year-on-year increase in sales within the
electrical wire and cable market. Excluding the impact of copper prices along
with the IMS acquisition and favorable foreign exchange effects, the Company's
net sales increased $218.6 million, or approximately 22%, in the 13 weeks ended
September 29, 2006 as compared to the corresponding period in the prior year.

Gross Margins: Gross margins increased in the third quarter of 2006 to 24.1%
compared to 23.7% in the corresponding period in 2005. The improvement in
margins primarily reflects changes in the sales mix between end markets.

Operating Income: As a result of very strong sales growth, a 40 basis point
increase in gross margins and tight expense controls, operating margins were
7.2% in the third quarter of 2006 as compared to 4.8% in the third quarter of
2005. Operating expenses increased $33.7 million, or 17.6%, in the third quarter
of 2006 from the corresponding period in 2005. The May 2006 acquisition of IMS
increased operating expenses by $2.5 million, while changes in foreign exchange
rates increased operating expenses by $3.6 million. Excluding the acquisition of
IMS and the effects from changes in foreign exchange rates, operating expenses
increased approximately $27.6 million, or 14.4%, primarily due to variable costs
associated with higher sales volumes.

Improved operating margins on higher sales generated an increase in
operating income of $47.2 million, or 96.7%, in the 13 weeks ended September 29,
2006 as compared to the corresponding period in 2005. The acquisition of IMS in
May 2006 accounted for $1.3 million of the increase while favorable foreign
exchange added $2.0 million to third quarter of 2006 operating income as
compared to the year ago period. Excluding the acquisition of IMS and the
favorable effects of foreign exchange rates, operating income increased $43.9
million in the 13 weeks ended September 29, 2006 as compared to the same period
in 2005. The Company estimates that higher copper prices added $18 million to
the Company's electrical and electronic wire and cable operating income in the
13 weeks ended September 29, 2006 as compared to the corresponding period in
2005. Excluding the estimated $18 million effect of higher copper prices, along
with the acquisition of IMS and favorable foreign exchange rates, the Company's
third quarter of 2006 operating income would have been $74.8 million, which
represents operating margins of 6.1%.

Interest Expense: Consolidated interest expense was $10.0 million in the
third quarter of 2006 as compared to $6.9 million in 2005. Interest expense
increased due to additional borrowings to fund the acquisitions of Infast in
July 2005 and IMS in May 2006 and to pay the special dividend in October 2005.
The average long-term debt balance in the third quarter of 2006 was $738.0
million as compared to $553.2 million in the corresponding period in 2005. With
the interest rates on approximately two-thirds of the Company's borrowings
fixed, the Company's average cost of borrowings for the third quarter of 2006
rose modestly to 5.5% from 5.0% in the corresponding third quarter of 2005.

Other, net:

13 WEEKS ENDED
----------------------------
SEPTEMBER 29, SEPTEMBER 30,
2006 2005
------------- ------------
(IN MILLIONS)

Foreign exchange................................. $ 0.4 $ (0.2)
Cash surrender value of life insurance policies.. 0.8 0.6
Interest income, net............................. 7.1 (0.6)
Other............................................ (0.1) (0.1)
----------- -----------
$ 8.2 $ (0.3)
=========== ===========

Due to a favorable movement in the Euro, foreign exchange resulted in a $0.4
million gain in the third quarter of 2006 as compared to a foreign exchange loss
of $0.2 million in the corresponding period in 2005. Interest income, net
increased in the third quarter of 2006 as compared to the corresponding period
in the prior year due to the tax settlement with the IRS.

ANIXTER INTERNATIONAL INC.

Income Taxes: The consolidated tax provision increased to $18.1 million in
the third quarter of 2006 from $16.6 million in the third quarter of 2005,
primarily due to an increase in income before taxes offset by the $18.1 million
reduction in the third quarter of 2006 tax provision primarily as a result of
the IRS settlement. The effective tax rate is 19.3% for the 13 weeks ended
September 29, 2006 compared to 39.8% for the corresponding period in 2005.
Excluding the tax settlement, the Company's effective tax rate was 38.4% for the
13 weeks ended September 29, 2006.

NORTH AMERICA RESULTS OF OPERATIONS

13 WEEKS ENDED
-----------------------------------------
SEPTEMBER 29, SEPTEMBER 30, PERCENT
2006 2005 CHANGE
------------- ------------- -------
(IN MILLIONS)

Net sales ........................ $ 991.7 $ 747.5 32.7%
Gross profit ..................... $ 235.2 $ 176.4 33.3%
Operating expenses ............... $ 157.6 $ 133.8 17.8%
Operating income ................. $ 77.6 $ 42.6 82.1%

Net Sales: When compared to the corresponding period in 2005, North America
net sales for the 13 weeks ended September 29, 2006 increased 32.7% to $991.7
million, including $13.6 million due to the acquisition of IMS, a $10.8 million
favorable effect of Canadian exchange rates and an estimated $63 million due to
higher copper prices. Excluding the favorable effects of higher copper prices,
the acquisition of IMS and foreign exchange rate changes, North America net
sales were $904.3 million in the 13 weeks ended September 29, 2006, which
represents an increase of $156.8 million, or approximately 21%, over the
corresponding quarter in 2005. Enterprise cabling and security solutions sales
in North America increased $79.2 million in the third quarter of 2006, or 20.3%,
compared to the corresponding period in the prior year. The stronger Canadian
dollar accounted for $3.1 million of the increase while the remainder of the
increase represents improved demand from both new and existing customers,
continued strong growth in the security market, an expanded supply chain
services offering, product line expansion and a stronger pricing environment.
North America electrical and electronic wire and cable sales of $342.9 million
increased $139.4 million, or 68.5%, due to a combination of increased demand
from existing customers, the addition of new customers, the effects of higher
copper prices (which added approximately $63 million to sales), the stronger
Canadian dollar (which added approximately $7.3 million to third quarter sales)
and the acquisition of IMS (which added approximately $13.6 million to sales).
Excluding the effects of copper, foreign exchange and IMS, the electrical and
electronic wire and cable sales were up approximately 27% in the third quarter
of 2006 as compared to the corresponding period in 2005. In the OEM supply
market, sales increased 14.0%, or $12.7 million, as we continue to add new
customers as well as expand our relationship with existing customers. Although
the Company continues to experience variability in sales to telecom original
equipment manufacturers related to the capital spending patterns of their
customers, sales to this end market increased 27.7% in the third quarter of 2006
as compared to the third quarter of 2005.

Gross Margins: Gross margins increased to 23.7% in the third quarter of
2006 from 23.6% for the same period in 2005. The increase is primarily due to a
favorable sales mix.

Operating Income: Operating expenses increased $23.8 million in the third
quarter of 2006 from the corresponding period in 2005. The increase is primarily
due to variable costs associated with the increase in sales volume, the addition
of IMS expenses of $2.5 million and foreign exchange rate changes that increased
operating expenses by $1.4 million. Due to the sales growth of 32.7%, higher
copper prices and associated leveraging of the expense structure, operating
margins were 7.8% in the third quarter of 2006 as compared to 5.7% in the third
quarter of 2005. While strong market conditions and market share gains were the
primary drivers of the sales growth and improved profitability, copper prices
played a meaningful part in the strong third quarter operating results in North
America. The Company has estimated that the effects of higher copper prices in
the electrical and electronic wire and cable market had the effect of increasing
North America operating income by $17 million versus the year ago quarter.
Canadian foreign exchange rate changes had a $1.5 million favorable impact on
third quarter of 2006 operating income, while IMS added $1.3 million to
operating income. Excluding the effects of higher copper prices, favorable
effects of foreign exchange rates and the acquisition of IMS, operating income
would have been $57.8 million and operating margins would have been 6.4%.

ANIXTER INTERNATIONAL INC.

EUROPE RESULTS OF OPERATIONS

13 WEEKS ENDED
-----------------------------------------
SEPTEMBER 29, SEPTEMBER 30, PERCENT
2006 2005 CHANGE
------------- ------------- -------
IN MILLIONS)

Net sales ...................... $ 244.5 $ 193.8 26.1%
Gross profit ................... $ 65.2 $ 49.4 31.9%
Operating expenses ............. $ 53.2 $ 45.5 16.8%
Operating income ............... $ 12.0 $ 3.9 204.1%

Net Sales: Europe net sales increased 26.1% in the third quarter of 2006 to
$244.5 million from $193.8 million in the third quarter of 2005. Favorable
foreign exchange increased net sales by $10.6 million in the third quarter of
2006 while copper prices in the electrical and electronic wire and cable market
contributed $5 million to sales. Excluding the foreign exchange rate changes and
higher copper prices, net sales increased $35.1 million, or approximately 18%,
which is the strongest the Company has experienced in several quarters. European
sales reflects improved economic conditions, particularly the number of larger
projects in the market, good progress in our efforts to build a stronger
presence in the electrical and electronic wire and cable market, expanding our
presence in the Mideast and continuing strong growth in our OEM supply business
as compared to the corresponding period in 2005.

Gross Margins: Europe's gross margins increased to 26.7% in the third
quarter of 2006 from 25.5% in the same period in 2005. Europe's gross margin
improvement reflects a change in the sales mix between end-markets.

Operating Income: Compared to the third quarter of 2005, Europe's operating
expenses increased 16.8%, or $7.7 million, to $53.2 million in the third quarter
of 2006. Europe operating margins increased from 2.1% in the third quarter of
2005 to 5.0% in 2006. Our European OEM supply business continues to generate
solid operating margins. Exchange rate changes had a $0.5 million favorable
impact on operating income while higher copper prices increased operating income
by an estimated $1 million.

EMERGING MARKETS RESULTS OF OPERATIONS

13 WEEKS ENDED
-------------------------------------------
SEPTEMBER 29, SEPTEMBER 30, PERCENT
2006 2005 CHANGE
------------- ------------- -------
(IN MILLIONS)

Net sales ...................... $ 94.3 $ 67.9 38.7%
Gross profit ................... $ 20.1 $ 13.8 45.9%
Operating expenses ............. $ 13.6 $ 11.4 18.7%
Operating income ............... $ 6.5 $ 2.4 179.2%

Net Sales: Emerging Markets' (Asia Pacific and Latin America) net sales
were up 38.7%, to $94.3 million in the third quarter of 2006, from $67.9 million
in the third quarter of 2005. Latin America sales grew 38.3%, while Asia Pacific
sales were up 39.9% during the third quarter of 2006 compared to the
corresponding period in 2005. The increase in Asia Pacific is due to strong
sales in Australia and India. The sales growth in Latin America was throughout
the region. Exchange rate changes had a minimal impact on sales.

Gross Margins: During the third quarter of 2006, Emerging Markets' gross
margins increased to 21.3% from 20.3% in the corresponding period in 2005. The
increase primarily resulted from the strong pricing environment in Mexico and
Brazil.

Operating Income: Operating expenses increased $2.2 million, or 18.7%, in
the third quarter of 2006 as compared to the corresponding period in 2005.
Emerging Markets' operating margins increased to 6.9% in the third quarter of
2006 from 3.4% in 2005 primarily as a result of the sales growth throughout
these markets and resulting leveraging of the expense structure. Exchange rate
changes had a minimal impact on operating income.

ANIXTER INTERNATIONAL INC.

YEAR-TO-DATE 2006 RESULTS OF OPERATIONS

OVERVIEW

In the 39 weeks ended September 29, 2006, sales increased 29.0% and
produced net income of $156.9 million as compared to $69.9 million in the
corresponding period in 2005. Sales, gross profits, operating expense and
operating profits, all showed year-on-year increases from a combination of the
acquisitions of Infast in July 2005 and IMS in May 2006, combined unit growth,
commodity driven price increases (primarily copper) and exchange rate changes
related to the weaker U.S. dollar.

The Company estimates that higher copper prices added $140 million to its
electrical and electronic wire and cable sales and $39 million to operating
income in the 39 weeks ended September 29, 2006. These amounts reflect our best
estimates of the effects of higher copper prices. There is no exact measure of
the effect of higher copper prices, as there are thousands of transactions in
any given quarter, each of which has various factors involved in the individual
pricing decisions. For further information on the effect copper pricing may have
on the Company's future results of operations, see the "Overview" section of the
"Third Quarter 2006 Results of Operations."

Gross margins increased 40 basis points in the 39 weeks ended September 29,
2006 as compared to the corresponding period in 2005, primarily due to an
improved sales mix, higher prices and an increase in electrical and electronic
wire and cable gross margins. As a result of strong sales growth and higher
gross margins and our ability to further leverage the Company's operating
expense structure, operating margins increased 200 basis points to 6.8% in the
39 weeks ended September 29, 2006 as compared to 4.8% in the corresponding
period in 2005.

The 39 weeks ended September 29, 2006 results of operations for the Company
include the same effects as noted in the "Third Quarter 2006 Results of
Operations" related to the tax settlement with the IRS.

CONSOLIDATED RESULTS OF OPERATIONS

39 WEEKS ENDED
-------------------------------------------
SEPTEMBER 29, SEPTEMBER 30, PERCENT
2006 2005 CHANGE
------------- ------------- -------
(IN MILLIONS)

Net sales ..................... $ 3,640.8 $ 2,821.8 29.0%
Gross profit .................. $ 884.8 $ 674.5 31.2%
Operating expenses ............ $ 638.1 $ 539.8 18.2%
Operating income .............. $ 246.7 $ 134.7 83.1%

Net Sales: The Company's net sales in the 39 weeks ended September 29, 2006
increased 29.0% to $3,640.8 million from $2,821.8 million in the same period in
2005. Excluding the Infast sales for the first six months of 2006 (Infast was
acquired in July 2005) of $140.2 million, the IMS sales in 2006 (IMS was
acquired in May 2006) of $18.3 million and the favorable impact of foreign
exchange of $29.9 million, the Company's net sales increased $630.6 million, or
approximately 22.3%, in the 39 weeks ended September 29, 2006 as compared to the
corresponding period in the prior year. The increase in net sales was due to a
combination of increased customer spending, market share gains from the addition
of new customers and expanded supply chain services offering, continued growth
from our initiative to expand our security products distribution business and
higher copper prices. The Company estimates that higher copper prices during
2006 have increased electrical and electronic wire and cable sales by $140
million versus the same period in 2005. Excluding the effects of higher copper
prices, along with the acquisitions described above and the effects from changes
in exchange rates, the Company's net sales increased $490.6 million, or
approximately 17.4%, during the 39 weeks ended September 29, 2006 from the same
period in 2005.

Gross Margins: Gross margins increased to 24.3% in the 39 weeks ended
September 29, 2006 from 23.9% in the corresponding period in 2005. The increase
in margins is attributable to changes in the sales mix between end markets.

ANIXTER INTERNATIONAL INC.

Operating Income: As a result of very strong sales growth, a 40 basis point
increase in gross margins and tight expense controls, operating margins were
6.8% for the 39 weeks ended September 29, 2006 as compared to 4.8% in the
corresponding period in 2005. Operating expenses increased $98.3 million, or
18.2%, in the 39 weeks ended September 29, 2006 from the corresponding period in
2005. The Infast and IMS acquisitions increased operating expenses by $39.1
million, while changes in exchange rates increased operating expenses by $4.0
million. Excluding the acquisitions and the effects from changes in exchange
rates, operating expenses increased approximately $55.2 million, or 10.2%,
primarily due to variable costs associated with higher sales volumes, along with
increases in healthcare costs, pension costs and costs associated with
additional restricted stock grants.

Improved operating margins on higher sales generated an increase in
operating income of $112.0 million, or 83.1%, in the 39 weeks ended September
29, 2006 as compared to the corresponding period in the prior year. The
acquisitions of Infast and IMS increased operating income by $3.3 million, while
the favorable effects of foreign exchange rates added $3.9 million to operating
income in the 39 weeks ended September 29, 2006 as compared to the year ago
period. Excluding the acquisitions of Infast and IMS and the favorable effects
of foreign exchange rates, operating income increased $104.8 million in the 39
weeks ended September 29, 2006 as compared to the corresponding period in 2005.
The Company has estimated that the combined effects of higher copper prices on
sales and gross margins added $33 million to the Company's electrical wire and
cable operating income during the 39 weeks ended September 29, 2006 as compared
to the year ago period, while inventory gains added $6 million to operating
income in the second quarter of 2006 (due to the sell through of lower cost
inventory and significant run up in copper prices in that quarter). Excluding
the effects of higher copper prices, the inventory gains in the second quarter
of 2006, the acquisitions of Infast and IMS and the favorable effects of foreign
exchange, operating income for the 39 weeks ended September 29, 2006 would have
been $200.5 million, which represents an operating margin of 6.1%.

Interest Expense: Consolidated interest expense increased to $27.5 million
in the 39 weeks ended September 29, 2006 from $18.9 million in the corresponding
period in 2005. Interest expense increased due to the issuance of the Senior
Notes in 2005, additional borrowings to fund the acquisitions of Infast in July
2005 and IMS in May 2006 and to pay the special dividend in October 2005. The
average debt balance was $694.0 million and $512.8 million for the 39 weeks
ended September 29, 2006 and September 30, 2005, respectively. The average
interest rate for the 39 weeks ended September 29, 2006 and September 30, 2005
was 5.3% and 4.9%, respectively.

Other, net:

39 WEEKS ENDED
-----------------------------
SEPTEMBER 29, SEPTEMBER 30,
2006 2005
------------- -------------
(IN MILLIONS)

Foreign exchange ................................. $ (1.3) $ (2.5)
Cash surrender value of life insurance policies... 1.4 0.6
Interest income, net ............................. 6.8 (0.1)
Other ............................................ (0.3) (0.3)
---------- ----------
$ 6.6 $ (2.3)
========== ===========

Foreign exchange losses declined $1.2 million during the 39 weeks ended
September 29, 2006 compared to the corresponding period in 2005 primarily due to
a favorable movement of the Euro. Interest income, net increased in the 39 weeks
ended September 29, 2006 as compared to the corresponding period in the prior
year as a result of interest income recorded in the third quarter of 2006
related to the tax settlement with the IRS.

Income Taxes: The consolidated tax provision increased to $68.9 million in
the 39 weeks ended September 29, 2006 from $42.4 million in the corresponding
period in 2005, due to an increase in income before taxes offset by the $18.1
million reduction in the third quarter of 2006 tax provision primarily as a
result of the IRS settlement. The effective tax rate is 30.5% for the 39 weeks
ended September 29, 2006 compared to 37.8% for the corresponding period in 2005.
The decrease in the effective tax rate is due to the effect of the tax refund
from the IRS. Excluding the tax settlement, the Company's effective tax rate was
38.5% for the 39 weeks ended September 29, 2006. The tax rate for the 39 weeks
ended September 30, 2005 had been decreased due to a $1.4 million tax credit
resulting from a favorable tax ruling in Europe during the second quarter of
2005.

ANIXTER INTERNATIONAL INC.

NORTH AMERICA RESULTS OF OPERATIONS

39 WEEKS ENDED
-------------------------------------
SEPTEMBER 29, SEPTEMBER 30, PERCENT
2006 2005 CHANGE
------------ ------------ -------
(IN MILLIONS)

Net sales ........................... $ 2,693.2 $ 2,102.2 28.1%
Gross profit ........................ $ 649.7 $ 502.9 29.2%
Operating expenses .................. $ 448.9 $ 390.4 15.0%
Operating income .................... $ 200.8 $ 112.5 78.4%

Net Sales: When compared to the corresponding period in 2005, North America
net sales for the 39 weeks ended September 29, 2006 increased 28.1% to $2,693.2
million. Excluding the Infast sales for the first six months of 2006 (Infast was
acquired in July 2005) of $9.8 million, the IMS sales in 2006 (IMS was acquired
in May 2006) of $18.3 million and the favorable impact of foreign exchange of
$32.0 million, the North America sales growth was 25.3%. The Company estimates
that higher copper prices during 2006 have increased North America electrical
wire and cable sales by $129 million versus the same period in 2005. Excluding
the effects of higher copper prices, the acquisitions and the favorable effects
of foreign exchange rates, sales in North America were $2,504.1 million, which
represents an increase of 19.1% in the 39 weeks ended September 29, 2006 as
compared to the corresponding period in 2005. The electrical and electronic wire
and cable sales increased $325.4 million while enterprise cabling sales
increased $210.0 million in the 39 weeks ended September 29, 2006 as compared to
the corresponding period in 2005, due to improved demand from both new and
existing customers, continued strong growth in the security market, an expanded
supply chain services offering, product line expansion, a stronger pricing
environment and the effects of higher copper prices. In the OEM supply market,
sales increased 20.3% on a combination of improved customer demand, new contract
additions and the acquisition of Infast. Sales to telecom-related OEMs increased
3.3% in the 39 weeks ended September 29, 2006 as compared to the corresponding
period in 2005.

Gross Margins: Gross margins increased to 24.1% in the 39 weeks ended
September 29, 2006 from 23.9% for the same period in 2005. The increase is
attributable to an improved sales mix, higher prices and higher margins in the
electrical and electronic wire and cable market.

Operating Income: Operating expenses increased $58.5 million in the 39
weeks ended September 29, 2006 from the corresponding period in 2005. The
increase is primarily due to variable costs associated with the increase in
sales volume, along with higher pension and healthcare costs and expenses
related to additional restricted stock grants and the acquisitions of Infast and
IMS. Primarily as a result of higher gross margins on an improved sales mix,
copper price increases and continued tight expense controls, North America
operating margins increased to 7.5% in the 39 weeks ended September 29, 2006
from 5.4% in the corresponding period in 2005. The Company has estimated that
the combined effects of higher copper prices on sales and gross margins in the
electrical and electronic wire and cable market had the effect of increasing
North America operating income by $37 million versus the year ago period. During
the 39 weeks ended September 29, 2006, the acquisitions of Infast and IMS
increased operating income by $1.2 million while favorable effects of foreign
exchange rates increased operating income by $3.9 million. Excluding the effects
of higher copper prices, the acquisitions of Infast and IMS and favorable
effects of foreign exchange rates, operating income was $158.7 million during
the 39 weeks ended September 29, 2006, which represents an operating margin of
6.3%.

EUROPE RESULTS OF OPERATIONS

39 WEEKS ENDED
-------------------------------------
SEPTEMBER 29, SEPTEMBER 30, PERCENT
2006 2005 CHANGE
------------ ------------ -------
(IN MILLIONS)

Net sales ........................... $ 704.6 $ 526.8 33.8%
Gross profit ........................ $ 182.9 $ 132.5 38.0%
Operating expenses .................. $ 153.0 $ 117.0 30.8%
Operating income .................... $ 29.9 $ 15.5 92.5%

ANIXTER INTERNATIONAL INC.

Net Sales: Europe net sales increased 33.8% in the 39 weeks ended September
29, 2006 to $704.6 million from $526.8 million in the corresponding period in
2005. Excluding the Infast sales for the first six months of 2006 (Infast was
acquired in July 2005) of $130.4 million and the unfavorable foreign exchange
impact of $2.9 million, Europe's sales increased $50.3 million, or 9.5%. The
Company has estimated that higher copper prices during the 39 weeks ended
September 29, 2006 have increased the electrical and electronic wire and cable
sales in Europe by $11 million versus the same period in 2005.

Gross Margins: Europe's gross margins increased to 26.0% in the 39 weeks
ended September 29, 2006 from 25.1% in the corresponding period in 2005. The
increase is primarily due to higher margins in the electrical and electronic
wire and cable business.

Operating Income: Compared to the 39 weeks ended September 30, 2005, Europe
operating expenses increased 30.8%, or $36.0 million, to $153.0 million in the
39 weeks ended September 29, 2006. Included in the increase is $33.5 million due
to the acquisition of Infast offset by a favorable impact of changes in exchange
rates of $0.5 million. Excluding the acquisition of Infast and exchange rate
impact, operating expenses were approximately $3.0 million, or 2.6%, higher than
2005. Higher gross margins, tight expense controls, substantial improvement in
operating performance in the Europe electrical and electronic wire and cable
business and an almost flat exchange rate change impact on operating income
resulted in operating margins increasing 120 basis points to 4.2% in 2006 as
compared to 3.0% in 2005. The Company estimates that the higher copper prices
increased Europe operating income by $2 million in the 39 weeks ended September
29, 2006.

EMERGING MARKETS RESULTS OF OPERATIONS

39 WEEKS ENDED
-------------------------------------
SEPTEMBER 29, SEPTEMBER 30, PERCENT
2006 2005 CHANGE
------------ ------------ -------
(IN MILLIONS)

Net sales ........................... $ 243.0 $ 192.8 26.0%
Gross profit ........................ $ 52.2 $ 39.1 33.5%
Operating expenses .................. $ 36.2 $ 32.4 11.5%
Operating income .................... $ 16.0 $ 6.7 140.5%

Net Sales: Emerging Markets (Asia Pacific and Latin America) net sales were
up 26.0%, to $243.0 million in the 39 weeks ended September 29, 2006, from
$192.8 million in the 39 weeks ended September 30, 2005, including a $0.8
million favorable impact from changes in foreign exchange rates. Latin America
sales grew 24.7%, while Asia Pacific sales increased 29.8% in the 39 weeks ended
September 29, 2006 compared to the corresponding period in 2005. The sales
growth in Latin America was throughout the region. The increase in Asia Pacific
is due to strong sales in Australia and India.

Gross Margins: During the 39 weeks ended September 29, 2006, Emerging
Markets' gross margins increased to 21.5% from 20.3% in the corresponding period
in 2005. The increase is primarily due to the strong pricing environment in
Latin America.

Operating Income: Emerging Markets operating income increased $9.3 million,
or 140.5%, in the 39 weeks ended September 29, 2006 as compared to the
corresponding period in the prior year. Operating expenses increased only $3.8
million, or 11.5%, as compared to the corresponding period in 2005. A favorable
sales tax-related settlement in Australia reduced operating expenses $2.2
million in the 39 weeks ended September 29, 2006. Excluding the sales
tax-related settlement, operating expenses increased $6.0 million, or 18.3%,
from the corresponding period in 2005. Primarily as a result of the sales growth
and resulting leveraging of the expense structure, operating margins increased
to 6.6% (5.7% excluding the favorable affect of the sales tax related settlement
of $2.2 million) in the 39 weeks ended September 29, 2006 from 3.5% in 2005.
Exchange rate changes had a minimal impact on operating income.

ANIXTER INTERNATIONAL INC.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
conducted an evaluation as of September 29, 2006 of the effectiveness of the
design and operation of our disclosure controls and procedures, as such term is
defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Based on this evaluation, our principal
executive officer and our principal financial officer concluded that our
disclosure controls and procedures were effective as of September 29, 2006.
There was no change in the Company's internal control over financial reporting
that occurred during the 13 weeks ended September 29, 2006 that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.

ANIXTER INTERNATIONAL INC.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS

(10) Material Contracts.

10.1 Amendment No. 4 to Amended and Restated Receivables Purchase
Agreement, dated September 28, 2006, among Anixter Receivables
Corporation, as Seller, Anixter, Inc., as Servicer, JPMorgan
Chase Bank, NA, as Agent and the other financial institutions
named herein.

(31) Rule 13a -- 14(a) / 15d -- 14(a) Certifications.

31.1 Robert W. Grubbs, President and Chief Executive Officer,
Certification Pursuant to Section 302, of the Sarbanes-Oxley Act
of 2002.

31.2 Dennis J. Letham, Senior Vice President-Finance and Chief
Financial Officer, Certification Pursuant to Section 302, of the
Sarbanes-Oxley Act of 2002.

(32) Section 1350 Certifications.

32.1 Robert W. Grubbs, President and Chief Executive Officer,
Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Dennis J. Letham, Senior Vice President-Finance and Chief
Financial Officer, Certification Pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.

ANIXTER INTERNATIONAL INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

ANIXTER INTERNATIONAL INC.

November 2, 2006 By: /s/ Robert W. Grubbs
-----------------------------------
Robert W. Grubbs
President and Chief Executive Officer

November 2, 2006 By: /s/ Dennis J. Letham
-----------------------------------
Dennis J. Letham
Senior Vice President -- Finance
and Chief Financial Officer